A RECIPE FOR SUCCESS

Top 10 of Malaysia talks to Secret Recipe’s Dato’ Steven Sim

May 2011

Dato’ Steven Sim sometimes takes it upon himself to patronise any one of the 200 or so Secret Recipe outlets in Malaysia. Some of the staff recognize him as Secret Recipe’s founder, while many do not - so they should be wary who it is they’re attending to. Sim thinks that this simple method is an easy way to gauge the standard of service offered by his franchise, a culmination of almost 15 years of effort.

“We saw a big vacuum in the casual dining industry here, which was mostly populated by fast food outlets. We didn’t want to be called a cake shop, but to be a café where people could come in and have food and cake.

“So in the year 2000, we started franchising. The initial stage was to franchise to close friends and family within Malaysia. We wanted to protect our trade secrets, especially our recipes. The growth of the outletswas good and we received many requests to franchise outside the Klang Valley like Penang and Ipoh.Throughout the years we fine-tuned the franchising system because it was very important to have a strongsystem to control the consistency and quality of the products,” said Sim.

Territorial ExpansionVery soon, though, Sim’s successes invigorated him to take his brand abroad.“Our first foreign franchise was in Singapore. It was a challenge for us because Singaporean brands arealways seen as superior to Malaysia’s so it was a task to be comparatively good to our Singaporeancompetitors. Our brand was not known at that time so there were few shopping centres who offeredus the best parts of their malls.

“After Singapore, we expanded to Indonesia then Thailand and the Philippines and now we’re in eight countries, the latest being Australia. Every country we go into is a different battlefield altogether - how to localise and adapt to the demographic. For example, before Australia, we were in China. AlthoughChina is opening up and is advancing, very few are exposed to Western food so we had to localise some of the products by introducing more noodle-based products. In Australia, we had to introduce local Australian dishes so we got some good Australian chefs to come in and produce great dishes for us, like ourChicken Parma, which is a hit.

“The results have been surprising. Our four outlets in Australia are doing well and about 80 percent of the people who come to our outlets are the locals and not migrants residing there. Cake products are very competitive in Australia but the thing with that country is that the shops often outsource their cakes due to high labour costs. So several shops may have the same offerings whereas we have our own cakes. Having our own production capabilities means we are able to cater to customers’ wants very quickly,” he said.

Secret Recipe’s success in the region seems easier said than done. Sim is quick to point out that there is a certain progression from local to international that takes place, and people often want to put the cart after the horse in their business expansion plans.

“The first thing is to be profitable and to be able to succeed locally before going abroad and this is a mistake a lot of people make. This is because when you go into another market, it’s a different battlefield altogether, a new environment. Take India, for example, which is the next country we’re going into. Very few know Malaysia and India has a very large section of society that’s poor, a smaller yet bustling middle class and a tiny super-rich section of society. So the strategy is a little bit different, how to position oneself in another country.

“What is the cost to learn? For us the first few years in China involved spending millions of US dollars just to learn and sustain ourselves there. That’s why there are few successful Malaysian brands in other countries- even the big players have tried to penetrate the Chinese market and had to pack their bags and return because paying that much to be in the learning process is something few companies can afford,” warnedSim.

Carrying the FlagAccording to Sim - at least in the Australian context – Malaysians can do well there because a sizable number of Malaysians reside there. Malaysians’ private investments in Australia are also quite substantial so there is a level of familiarity of Malaysians in the Australian culture and economy.

“China, on the other hand, is a different issue altogether. Malaysian (food) brands don’t really carry much weight there because to them, there isn’t much about Malaysian food that is familiar to them. Our local food is very popular within the country, but not to foreign countries. Those in Beijing and Shanghai do not know what satay and nasi lemak are, but we introduced those products there along with mee goreng mamak and hokkien mee.

“We are trying to be food ambassadors but the concept of ‘Brand Malaysia’ is something that needs to be furthered by the Malaysian government. Their task is to promote local brands strongly and support them abroad, which is something lacking in the current situation, in bringing local retail brands abroad. This is unlike, say, the Singaporean government which always makes sure their brands like Capitaland and Temasek are present in their road shows abroad,” said Sim.

Moreover, Sim laments that it is hard enough that retail brands have to try and break into new markets when the Malaysian government is doing little to magnify the prominence of local brands to foreigners.

“Take for example, the case of landing in KLIA. Before we land we are shown tourism videos of popular places in Malaysia but they are always filled with images of foreign retail brands. If the government wants to promote Brand Malaysia it should have the will to put forward Malaysian retail brands. It can, for example, impose tax incentives for buying Malaysian products, then people would want to purchase Malaysian products,” he added.

Being Steven SimThe voluminous awards won by Secret Recipe is testament to Sim’s capability as an innovator and businessperson. He describes himself as “very down-to-earth” and a “people-person”.“Anyone who wants to come in and talk to me can do so because my door is never closed. We like people with innovative ideas and we reward those who think out of the box. Our staff is the strongest asset in our company especially the front line people who represent our brand. That’s why we have our own training school to train our staff in service, standards and management. At any given time we’re training about 20 to 30 people for different departments, where they are taught different modules throughout the day. Research and development is also very important in this company. We have a dedicated department in this matter to come up with new products,” said Sim.

The food industry has always been very challenging to many because whenever there is an economic downturn, people will start a food business based on the false and simple assumption that people needto eat. The wide range of local food, from the very cheap and diverse hawker food to fine dining already present is a tremendous barrier to entry.

“After we started this casual dining experience, many people tried to copy what we did but it’s okay because it pushes us to move forward. We know we have a competitive advantage, which is our products. Now we are the largest chain in Malaysia so we are constantly moving to improve ourselves,” said Sim.